Alternative Investments – How to Invest in Alternatives

In the face of continued economic uncertainty, and volatility in mainstream investment assets, many investors are looking further afield than stocks, bonds, and cash in order to generate much-needed income and growth.

One only has to conduct a brief search on the internet to find a whole range of investment alternatives, from portfolios of fine wine to the more traditional gold bullion and property. This innovative way of investing in art allows ‘art lovers’ as well as corporates to transform their passion into substitute investment.

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So where does the inexperienced investor, or indeed financial advisor, start when considering the prospect of adding alternative investment assets to a diversified portfolio? Well, the first thing that should be considered in my opinion is the status of the investor him/herself.

Should be subject to even be thinking about an alternative? Do they have a sizeable portfolio of investments to allocate 10 or 20 percent of their capital for relatively illiquid assets? At this stage of the process (very early), I will set the status of a potential client.

A little immediate question will reveal whether investors have the necessary experience to be certified as 'advanced' or 'High Net Worth'. This being the case, further investigation into the specific requirements of the Client acts, with the aim of building a picture of the individual in terms of risk tolerance, liquidity, investment horizon, and capital adequacy.

Here, we can ascertain whether this client is looking for a form of their investment income, or whether indeed they are looking for long-term capital growth or possibly even tax advantages that may be associated with certain alternative investment assets.